IFRS 9 override to last for five years

Councils have been granted a statutory override on accounting changes to pooled investments for five years, despite most stakeholders opposing a time-limited period.

The Ministry of Housing, Communities and Local Government After received 107 responses to its consultation on IFRS 9, which requires councils to charge assets to its revenue account based on current value year on year.

If the value of an asset falls this would leave a shortfall in council finances necessitating an increase in council tax.

The override means that councils must still record the value of their assets but do not have to charge it to their revenue account.

MHCLG said it intends to: “Require local authorities to account for fair value movements in financial instruments in accordance with proper practices as set out in the code on local authority accounting published by CIPFA”.

The consultation summary document, published on 8 November, revealed 90% of respondents said that they thought the statutory override period should not be time limited.

But the government said it “does not see the case for issuing an initial statutory override that has no time limit. This is because it would result in a permanent deviation from normal accounting practices which would add another level of complexity to local government accounts”.

Concerns were raised that the change “could result in potential burdens on the council tax payer or it could have impacts on service provision,” according to MHCLG.

PF understands that CIPFA had wanted an unlimited statutory override period, but if that could not be achieved then a five-year period was the preferred option.

MHCLG acknowledged the “vast majority” of respondents had expressed “concern” over a time limit being imposed at all and said it would “keep use of the override and the impact of allowing it to lapse on balanced budget calculations under review”.

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